U.S. Is Said To Cancel TRW Deal

By LAURENCE ZUCKERMAN

Published: July 4, 1994

In a highly unusual move, a Congressional agency has apparently canceled a secret multibillion-dollar contract awarded to TRW Inc. and has ruled that the losing bidders, the Lockheed Corporation and the Martin Marietta Corporation, be allowed to bid again.

TRW was awarded the contract last year by the National Reconnaissance Office, a large and secretive intelligence agency that, among other things, is responsible for buying satellites for the Pentagon and the Central Intelligence Agency.

In September, several months after the project was awarded, the House Appropriations Committee strongly criticized the National Reconnaissance Office for commissioning satellites without first clearing the decision with Congress. The committee's report accused the office of ignoring its request not to proceed until it received permission because members of the House and Senate Appropriations Committees believed that it "was too costly and did not adequately meet certain requirements."
New Round of Bidding

Now, after protests from Lockheed and Martin Marietta, the General Accounting Office, the auditing, review and investigative agency of Congress, has ruled that the contract be canceled and that the bidding take place again, The Los Angeles Times reported on Saturday.

A Lockheed spokesman said yesterday he could neither confirm nor deny the report, and telephone calls to the G.A.O., TRW and Martin Marietta were not returned or not answered over the holiday weekend. Bloomberg Business News reported that several people involved in the bidding process had confirmed the G.A.O. action.

The contract, for an advanced spy satellite that would scan the skies and oceans for aircraft and naval vessels, is reportedly worth $5 billion to $10 billion and represents one of the largest remaining Government contracts in an industry that has been badly weakened by budget cutbacks in recent years.
Ballast for Weaker Operations

"This is the last best hope for TRW and Lockheed to stay in the satellite business," said John Pike, director of the Space Policy Project at the Federation of American Scientists, a policy research group based in Washington. Martin Marietta and Hughes Aircraft already have several satellite contracts and so their futures as suppliers are assured, Mr. Pike said.

However, A spokesman for Lockheed said that the company had several commercial and Government-related satellite projects, including contracts to build the satellites for an ambitious global wireless-phone system being developed by Motorola and for a military-communications system being developed by the Pentagon. "We are certainly not out of the satellite business," the spokesman said.

Although the G.A.O. is best known for undertaking projects on behalf of Congress, its duties include reviewing contract awards to make sure that they comply with Federal law.

Should TRW lose the contract, 1,000 jobs might be lost at its design and production center in Redondo Beach, Calif. Lockheed's missile and space subsidiary is based in Sunnyvale, Calif.; Martin Marietta designs and builds its satellites in Denver.

Mr. Pike said that he could not recall when such a large contract was withdrawn. "If you are talking about computers that you buy off the shelf, those sort of contracts are routinely recompeted," he said. "But for a heavy-metal contract like this, I can't remember a time when that has been done."

The unusual move shows the fierce competition among contractors fighting for a declining amount of Government work. Mr. Pike said the National Reconnaissance Office had also been working to reduce the number of its contractors over the last decade.

"Ten years ago, TRW and Lockheed were synonymous with the N.R.O.," he said. "Now there is this sudden-death overtime to see which one gets the crumbs and which one gets none."

The project has been debated from the beginning. Intended to replace two competing systems put forth by the Air Force and the Navy, the so-called space-based wide-area surveillance satellites would use advanced radar to track planes and ships.

But since the breakup of the Soviet Union at the end of 1991, it has not been clear to arms experts and critics in Congress that the system is needed.

"Both the Air Force and Navy had very specific requirements, which were very much driven by the Soviet threat," Mr. Pike said.

After the contract was awarded, a Congressional aide said that the National Reconnaissance Office's decision not to consult with Congress had not been a deliberate violation of the legislators' request, but rather an embarrassing error.